Economic leaders, laggards

Jerome Idaszak, an editor with The Kiplinger Letter, is predicting mild economic recovery by the fourth quarter of 2009, with “slow and uneven” economic conditions through 2010.

Idaszak, in this commentary, said the typical post-recession trends may not occur in this recovery.

“And the leaders and laggards will be a bit unusual. Financial services, for example, typically benefits early from an economic pickup. But, badly lamed this year, it won’t exhibit the usual postrecession vigor,” he noted in the article.

Idaszak made the following predictions:
• Information technology will be at the fore of the recovery. After cutting way back on such investments this year, businesses are penciling in spending hikes for 2010 in anticipation of their own rising orders and sales. After a 25% decline in 2009, semiconductor makers, for example, should see a 25% production increase.

• Look for housing to set a fast pace as well. But it’s starting furlongs behind the gate. Housing starts will streak from about 500,000 this year to 825,000 in 2010. But that’s still running 45% below the long-term trend of 1.5 million starts a year.

• On autos, we expect about a 23% increase in output next year, with production climbing from about 5.5 million to 6.8 million vehicles. That’s a much improved performance, but no winner, considering the 35% output drop since 2007.

• Facing more shrinkage in 2010: Commercial real estate and construction. Office, shopping center and hotel vacancies are mounting more swiftly.

• Also down again next year will be chemicals, plastics, industrial metals, apparel and textiles, leather goods, legal services, advertising plus magazine and newspaper publishing.

• High inventories will hobble oil and gas refining and other fossil fuel industries. Demand isn’t likely to rebound much till economic recovery becomes widespread. But for alternative energy, such as wind, solar, biofuels, etc., we see a continued upswing in 2010.